Q2 2025 Angel Oak Mortgage REIT Earnings Call

Operator: Good day, and welcome to the Angel Oak Mortgage REIT Inc. second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. KC Kelleher. Please go ahead.

Good day and welcome to the Angel Oak Mortgage, right? Second quarter 2025 earnings conference call.

Participants will be in listen-only mode.

Should you need assistance please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad,

To withdraw your question. Please. Press star. Then 2

Please note this event is being recorded.

I would now like to turn the conference over to Mr. Kasey Keller.

KC Kelleher: Good morning, and thank you for joining us today for Angel Oak Mortgage REIT's Q2 2025 earnings conference call. This morning, we filed our press release detailing these results, which is available in the investors section on our website at www.angeloakreit.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings. During this call, we will be discussing certain non-GAAP financial measures.

Please go ahead.

Good morning, and thank you for joining us today for Angelo mortgage rates. Second quarter, 2025 earnings conference. Call this morning, we filed our press release detailing these results, which is available in the investors section on our website at www.angelo.edu.

As a reminder, remarks made on today's conference call may include forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.

We do not undertake any obligation to update our forward-looking statements in light of new information or future events.

for more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings

KC Kelleher: More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release and the SEC filings. This morning's conference call is hosted by Angel Oak Mortgage REIT's Chief Executive Officer, Sreeni Prabhu, and Chief Financial Officer, Brandon Filson. Management will make some prepared comments, after which we will open up the call to your questions. Additionally, we recommend reviewing our earnings supplement posted on our website, www.angeloakreit.com. Now, I will turn the call over to Sreeni.

During this call, we will be discussing certain non-gaap Financial measures.

More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our earnings release in the SEC filings.

Sreeni Prabhu: Thank you, KC, and thank you all for joining us today. The second quarter of 2025 was highlighted by our securitization and capital markets activity as we continue to execute towards the earnings growth goals. We completed two securitizations during the quarter and issued $42.5 million of unsecured debt. The capital released and raised by these transactions was deployed into high-quality loans that are expected to drive incremental earnings. Similar to senior unsecured notes we issued in 2024, we expect the new issuance to be accretive to earnings within the next quarter as the earnings from newly purchased assets make their way into the portfolio. This is a strategic playbook we have used successfully in the past, and it continues to be a vital growth catalyst for us and the performance of our investment portfolio.

This morning's conference call is hosted by Angel Oak, mortgage rates chief executive officer, cerini, prau, and Chief Financial Officer. Brandon Filson management will make some prepared comments after which, we will open up the call to your questions. Additionally, we recommend reviewing our earnings supplement posted on our website www.angelo.edu

Thank you, Casey, and thank you all for joining us today.

The second quarter of 2025 was highlighted by our security and capital markets activity.

As we continue to execute towards the earnings growth goals.

We completed 2 secrets during the quarter.

And it should 42.5 million of unsecured debt.

The capital released and raised by these transactions was deployed into high-quality loans that are expected to drive, incremental earnings.

Similar to senior unsecured notes. We shoot in 2024,

we expect a new issuance to be accredited to earnings within the next quarter.

As the earnings from newly purchased assets, make their way into the portfolio.

This is strategic Playbook. We have used successfully in the past.

Sreeni Prabhu: Results for the quarter were in line with expectations, with 5% growth in net interest income compared to Q2 2024 and a slight contraction compared to the first quarter due to the added expense of the new senior unsecured notes. Despite the decrease versus the last quarter, we have generated strong expansion in year-to-date net interest income compared to the first half of 2024, which Brandon will detail further. Book value declined slightly compared to the first quarter on a per-share basis, driven by a net decrease in valuations and the payment of our dividend. Cash flow and dividend coverage remain relatively stable and are expected to resume their respective growth trends demonstrated over the last two years, driven by earnings from assets purchased during and after the quarter.

And it continues to be vital growth, Catalyst for us and the performance of our Investment Portfolio.

Results for the quarter were in line with expectations with 5% growth in net interest income compared to Q2 2024.

And a slight contraction compared to the first quarter due to the added expense of the new senior unsecured notes.

Despite the decrease versus the last quarter.

We have generated strong expansion in year to date, net interest income compared to the first half of 2024.

Which Brandon will detail further?

Book value declines, slightly compared to the first quarter on per share basis.

Net decrease in valuations and the payment of a dividend.

Sreeni Prabhu: On credit, notably, 90-plus-day delinquency rates decreased at the portfolio-wide level compared to the past two quarters, driven by a reduction in delinquency rates for loans securitized in the past two years. The AOMT shelf has begun to distinguish itself among its peers with regards to delinquency performance, which is a direct reflection of our expertise as credit managers. Despite continued uncertainty surrounding international trade and tariff activity, our mortgage rates have been relatively stable, and we continue to purchase loans in the mid to high 7% range. Securitization markets have remained active and accretive amid the uncertainty, with both traditional and new participants being active in the market. We have ample opportunities to recycle capital and continue growing our target asset portfolio. Our capital deployment strategy will remain adaptive and flexible, aligning with evolving market dynamics in order to maximize expected returns for our shareholders.

Cash flow and dividend coverage remains relatively stable and are expected to resume their respective growth Trends. Demonstrated over the last 2 years, driven by earnings from assets, purchased during and after the quarter,

On credit notably 90 plus day, delinquency rates decreased at the portfolio wide level.

Compared to the Past, 2 quarters.

Driven by reduction in delinquency rates for loans secured in the past 2 years.

The aomt Shelf has begun to distinguish itself along his peers.

With regards to delinquency performance, which is a direct reflections of our expertise as credit managers.

Despite continued uncertainty, surrounded international trade and tariff activity.

Our mortgage rates have been relatively stable.

And we continue to purchase loans in the mid to high 7% range.

Securitization markets, have remained, active, and attractive amid uncertainty.

With both traditional and new participants being active in the market.

We have ample opportunities to recycle capital and continue growing. Our Target asset portfolio.

A capital deployment strategy will remain adaptive and flexible.

Sreeni Prabhu: Moving forward, our focus remains on executing our business strategy and delivering positive outcomes for our shareholders while positioning our balance sheet to be an active buyer of high-quality non-QM loans. With that, I'll turn it over to Brandon, who will walk us through our second quarter financial performance in greater detail.

Aligning with evolving market dynamics in order to maximize expected returns for our shareholders.

Moving forward, our focus remains on executing our business strategy and delivering positive outcomes for our shareholders while positioning our balance sheet to be an active buyer of high-quality, non-QM loans.

Brandon Filson: Thank you, Sreeni. Second quarter operating results were in line with expectations, with 5% net interest income growth versus the second quarter of 2024 and a slight contraction compared to the first quarter of 2025, owing to the increased interest expense associated with May's senior unsecured notes issuance. Year-to-date net interest income increased 11% compared to 2024. Operating expenses, excluding securitization costs, compensation expense, were $500,000, or 15% lower than in the second quarter of 2024 and relatively flat compared to the first quarter of 2025. Year-to-date operating expenses, excluding securitization costs and stock compensation, were 22% lower than in 2024. Valuations were a slight headwind during the second quarter, as increases in valuations for our loans and trust portfolio were offset by increases in the valuation of our non-recourse securitization obligation.

With that, I'll turn it over to Brandon who will walk us through a second quarter financial performance in Greater detail.

Thank you. Shirley second quarter operating results were in line with expectations with 5%. Net interest income growth versus the second quarter of 2024 and a slight contraction compared to the first quarter of 2025 owing to the increased interest expense associated with May's, senior unsecured notes, issuance year to date, net interest income, increased 11% compared to 2024 operating expenses excluding securitization costs. So compensation expense, or 500,000, or 15% lower than in the second quarter of 2024 and relatively flat, compared to the first quarter of 2025,

Year to date operating expenses, excluding securitization cost and stock compensation were 22% lower than in 2024.

Brandon Filson: As of today, we expect that our book value is approximately flat compared to the end of the second quarter. For the second quarter of 2025, we had GAAP net income of $767,000, or 3 cents per diluted common share. Distributable earnings for the second quarter were $2.6 million, or 11 cents per diluted common share. The main driver of the difference between GAAP net income and distributable earnings is the realization of the unrealized gains on residential loans that were securitized during the second quarter. For the second quarter, we had $1.6 million of unrealized loss on our securitized and residential loan portfolios. Interest income for the second quarter was $35.1 million, and net interest income was $9.9 million, marking a 35% improvement in interest income and a 5% improvement in net interest income compared to the second quarter of 2024.

Valuations were a slight headwind during the second quarter as increases in valuations for our loans. And Trust portfolio were offset by increases in evaluation of our non-recourse securitization obligation.

As of today, we expect that our book value is approximately flat compared to the end of the second quarter.

For the second quarter of 2025, we had Gap, income of 7006767000 or 3 cents per diluted common share.

Distributable earnings for the second quarter, were 2.6 million or 11 cents per diluted common. Share the main driver of the difference between gaap net income and distributable. Earnings is the realization of unrealized gains on residential loans that were securitized during the second quarter.

For the second quarter, we had 1.6 million dollars of unrealized loss on our securitized and residential loan portfolios.

Brandon Filson: Compared to the first quarter of 2025, interest income increased by 6.8% and net interest income decreased by 1%. For the first six months of the year, interest income was $68 million, and net interest income was $20 million, which translates to an improvement of 33% and 11% respectively compared to the first six months of 2024. Our $147 million of loan purchases in the quarter, inclusive of HELOCs and closed-in second mortgages, carried a weighted average coupon of 8.68% and a weighted average combined loan-to-value ratio of 68.4% and a weighted average FICO score of 757. The weighted average coupon of our residential home loan portfolio as of the end of the quarter was 8.37%, representing an expansion of 82 basis points versus the end of the first quarter and 66 basis points versus the same period of 2024.

Interest income for the second quarter was 35.1 million and net. Interest income was 9.9. Million marking a 35% Improvement in the interest income and a 5% Improvement in net interest income compared to the second quarter of 2024.

Compared to the first quarter of 2025.

interest income increased by 6.8% the net interest income decreased by 1%

for the first 6 Months of the Year interest income was 68 million.

And that interest income was 20 million, which translates to an improvement of 33 and 11% respectively compared to the first 6 months of 2024.

Our 147 million of loan purchases in the quarter, inclusive of a healox and closed in second mortgages.

Carried a weighted average coupon of 8.68%.

And a weighted average combined loaned value ratio of 68.4% and a weighted average FICO score of 757.

Brandon Filson: As of today, our current weighted average coupon is approximately 8.4%. Current loan production and loss had stable rates for the past several quarters. We completed two securitizations in the second quarter, where the sole contributor to AOMT 2025-4 contributed $284.3 million with loans. The deal paid down $242.4 million of warehouse debt and released $24.7 million of cash, which was used to purchase new loans and reduce outstanding repurchase debt on our retained bond portfolio to reduce financing risk. Additionally, we participated in AOMT 2025-6 alongside other Angel Oak entities, contributing $87.2 million of the total $349.7 million scheduled on paid principal balance. AOMT 2025-6 paid down outstanding debt of approximately $73.1 million and retained bonds with a value of $8.1 million, in addition to releasing $9.2 million of cash, which was also used to purchase new loans.

The weighted average coupon of our residential whole loan portfolio as of the end of the quarter was 8.37%, representing an expansion of 82 basis points versus the end of the first quarter and 66 basis points versus the same period in 2024.

As of today, our current weighted average coupon is approximately 8.4%.

Current Loan Production and locks have had stable rates for the past, several quarters.

ations in the second quarter where their sole contributor to aot 2025-26,

the deal paid down 242.4 million of Warehouse debt and released 24.7 million of cash, which was used to purchase new loans, and reduce outstanding repurchase debt on a retained Bond portfolio, to reduce financing risk,

Additionally, we participated in aot 202026, alongside other Angelic entities contributing 87.2 million of the total of 349.7 million scheduled on paid principal balance.

A1t 20226 pay down outstanding debt, approximately 73.1, million, and retain bonds with a value of 8.1 million in addition to releasing 9.2 million of cash.

Brandon Filson: As of the end of the quarter, our loans and securitization trust portfolio carried a weighted average coupon rate of 5.8% with a weighted average funding cost of approximately 4.1%. As Sreeni Prabhu mentioned, the securitization market remains active, and we intend to continue leveraging it through our disciplined methodical securitization strategy. Operating expenses for the second quarter were $5.1 million. Excluding non-cash stock compensation expenses and securitization costs, second quarter operating expenses were $2.9 million. This represents a 15% decrease compared to the same metric in the second quarter of 2024. For the first six months of the year, operating expenses were $8.1 million. Excluding non-cash stock compensation expenses and securitization costs, operating expenses for the first six months of the year were $5.7 million, representing a decrease of 22% compared to the first six months of 2024. Going forward, we expect to maintain similar operating expense levels.

Which was also used to purchase new loans.

As of the end of the quarter, our loans and securitization trust portfolio. Carried a weighted average coupon rate of 5.8%.

For the weighted average funding cost of approximately 4.1%.

Our shiny mentioned, the securitization Market remains active, and we intend to continue, leveraging it to our discipline methodical securitization strategy.

Operating expenses for the second quarter or 5.1 million excluding non-cash, stock compensation expenses and securitization costs. Second quarter, operating expenses were 2.9 Million. This represents a 15%, decrease compared to the same metric in the second quarter of 2024.

For the first 6 Months of the Year, operating expenses were 8.1 million.

Excluding non-cash stock compensation expenses and securitization cost.

Operating expenses for the first 6 months of the year were 5.7 million. Representing a decrease of 22% compared to the first 6 months of 2024.

Going forward. We expect to maintain similar operating expense levels.

Brandon Filson: Looking at our balance sheet as of the end of the quarter, we had $40.5 million in cash, and our recourse debt-to-equity ratio was 1.1 times. GAAP book value per share decreased 3.1% to $10.37 as of June 30, 2025, from $10.70 as of March 31, 2025. Economic book value, which fair values all non-recourse securitization obligations, was $12.97 per share as of June 30, 2025, down 3.3% from $13.41 per share as of March 31, 2025. The decrease in book value was driven primarily by the aforementioned unrealized losses on our unsecuritized portfolio and our Q2 dividend payment, offset by operating earnings generated by our portfolio.

Looking at our balance sheet as of the end of the quarter, we had 40.5 million dollars in cash and our recourse debt to equity ratio was 1.1 time.

Gap book value per share, decreased 3.1%, to $10.37 as of June 30th, 2025 from $10.70 as of March, 31st 2025

Economic Book value was fair. Value is all non-recourse securitization obligations.

was 12.97 per share, as of June 30th, 2025 down 3.3%, from 13.41 cents per share as of March 31st 2025

Brandon Filson: We ended the quarter with unsecuritized residential home loans, a fair value of $200.7 million, financed with $118.6 million of warehouse debt, $1.9 billion of residential mortgage loans and securitization trusts, and $383 million of RMBS, including $21 million of investments in comingled securitization entities, which are included in other assets on our balance sheet. We finished the quarter with undrawn loan financing capacity of approximately $931 million. Looking at credit, we ended the quarter with the total portfolio weighted average percentage of loans 90-plus days delinquent at 2.35%, inclusive of our residential loan, securitized loan, and RMBS portfolio, representing a decrease of 44 basis points from the first quarter of 2025. This decrease was observed notably in the loans underlying 2023-2024 securitizations, which had been the primary drivers of increases in the 90-plus days delinquent and prior quarters.

The decrease in Book value was driven, primarily by the upper mentioned unrealized losses on our unsecured ties portfolio and our Q2 dividend payment offset by operating earnings generated by our portfolio.

We ended the quarter with unsecured ties in residential whole loans at a fair value of $200.7 million, financed with $118.6 million of warehouse debt.

1.9 billion dollars of Residential Mortgage Loans and securities and trust and 383 million of rnbs.

including 21 million dollars of investments in co-mingled securitization entities, which are included in other assets on our balance sheet,

we finished the quarter with undrawn loan financing capacity of approximately 931 million.

Now, looking at credit, we ended the quarter with the total portfolio weighted average percentage of loans 90 plus days delinquent at 2.35%.

Inclusive of our residential loan securitization securitized loan.

Rmbs portfolio. Representing a decrease of 44 basis points from the first quarter of 2025.

This decrease was observed notably in the loans, underlying our 2023.

2024 securitizations.

Which had been the primary drivers of increases in the 90 plus days.

Delinquent in Prior quarters.

Brandon Filson: As expected, it appears performance in these securitizations has begun to normalize. The AOMT securitization shelf has started to demonstrate outperformance relative to other non-QM shelves in terms of delinquencies. We expect that through a credit cycle, this outperformance will lead to fewer defaults and lower losses than other non-QM securitization platforms. This expectation is born out of our intentional effort to move up on credit for our loan origination and purchases over the past couple of years and continues to provide us with the confidence we will deliver amid potential periods of volatility. Additionally, we expect our portfolio-wide LTV, diligent underwriting standards, and inherent credit selection to mitigate losses throughout the cycle if credit becomes an issue. Three-month prepayment speeds for our RMBS and securitized loan portfolios were 11.1% to end the quarter, reflecting an increase compared to the first quarter of 2025.

As expected it appears performance in these securitizations have begun to normalize. The A&T security Shelf, has started to demonstrate outperformance relative to other non-qm, shelves in terms of the increases, we expect that through a credit cycle. This outperformance will lead to fewer defaults and lower losses than other non-qm. Securitization platforms the 6 vacation is born out of our attentional, effort to move up in credit for our loan origination and purchases. Over the past couple of years and continues to provide us with the confidence. We will deliver amid potential periods of volatility.

Credit becomes an issue.

3-month prepayment speeds for our RMBS and securitized loan portfolios were 11.1% in the quarter.

Brandon Filson: The increase stems primarily from an acceleration in speed on securitizations within the past two years, as the loans underlying our older securitizations are still significantly below current mortgage rates. While speeds have accelerated, they are still well below historical and assumed rates of 20% to 30%, which is what we model our returns on. Finally, the company has declared a $0.32 per share common dividend, which will be paid on August 29, 2025, to common shareholders of record as of August 22, 2025. For additional color on our financial results, please review the earnings supplement available on our website. I will now turn it back to Sreeni for closing remarks.

Reflecting an increase compared to the first quarter of 2295.

Increased stems primarily from an acceleration and speed on securitizations within the past 2 years as the loans. Underlying our older securitizations are still significantly below, current mortgage rates.

While speeds have accelerated their still well below historical and assumed rates of 20 to 30%, which is what we model our Returns on.

Finally, the company has declared a 32 Cent per share common dividend, which will be paid on August 29th, 2025.

To come and shareholders of Records.

As of August 22nd 2025.

For additional color on our financial results. Please review the earnings supplement available on our website. I will now turn it back to shirini for closing remarks.

Sreeni Prabhu: Thank you, Brandon. I do like to thank the entire Angel Oak team for their hard work towards building what we believe is the best non-QM loan origination, purchase, and securitization platform by focusing on diligent credit selection, consistent securitization execution, and value-driven decision-making. We look forward to continuing to build long-term value for our shareholders in the coming quarters and years. With that, we will open up the call to your questions. Operator.

Thank you, Brandon.

I do like to thank the entire angel of team for the hard work towards building. What we believe is the best non-qm loan, origination purchase and signalization. Platform by focusing on diligent credit, selection, consistent secularization execution, and value. Driven decision making

We look forward to continuing to build long-term value for shareholders, in the coming quarters and years with that. We'll open up to the call to your questions, operator.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question will come from Douglas Harter with UBS Investment Bank. Please go ahead.

We will now begin the question and answer session.

To ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star. Then 2 at this time we will pause momentarily to assemble our roster.

Douglas Harter: Thanks, and good morning. I was hoping you could talk a little bit about your pathway for continuing to grow the portfolio, whether that is, you know, through additional unsecured issuance, continued recycling of the portfolio. Just, you know, help us understand how you see the capacity for further balance sheet growth from here.

The first question will come from Doug harder with UBS. Please go ahead.

Uh, thanks and good morning. I was hoping you could talk a little bit about, um, your your pathway for continuing to to grow the portfolio. Whether that's, you know, through additional unsecured issuance continued recycling, um, of the portfolio. Just, you know, help us uh, understand how you see the capacity for uh further further. Uh balance sheet growth from here.

Brandon Filson: Yeah, no, hey, Doug. I think, you know, this past week, we've seen a little bit of life in the preferred equity markets with Angel Oak Mortgage REIT Inc coming out with their deal that priced inside of 9%. I mean, certainly, we'd be a little bit higher pricing than that, but that's something we're looking at as far as an immediate growth trajectory and a different piece of the capital structure we haven't utilized yet. I believe that, at least in our current common equity base, we're probably more or less, let's call it, tapped out on senior unsecured notes issuance. So, there's a potential if the stock starts trading well, we could do a little ATM issuance, but nothing really that material for us.

Yeah, no. Hey. Hey Doug. Uh,

I think, you know, this past week, right? We've seen a little bit of, uh, life in, uh, the preferred equity markets, um, with Analy coming out with their deal that priced, uh, inside a 9%. I mean, certainly we...

be a little bit higher pricing than that. But that's something we're looking at as far as immediate growth, uh, trajectory and a, and a different piece of the capital structure. We haven't utilized, uh, you know, yet, uh, I believe that, you know, at least is our in our current common Equity base. We're probably

Brandon Filson: So really, we'd be looking at new capital in the preferred markets, especially if we think it's open now that Angel Oak Mortgage REIT Inc, like I said, has hit the market there. Really, it's recycling. You know, we have some additional leverage we can apply from the $42 million that we're continuing to apply over time. If you look at our unsecured portfolio right now, it's like 50% leverage. We have additional leverage we can apply there to keep buying loans and keep our cash balance about the same. So we have several more securitizations in the pipeline that should free up capital that we'll be able to continue purchasing loans and really, much like we did last fall, you should see, or we're expecting next quarter to really grow the net interest margin again to continue to improve dividend coverage from a cash flow basis.

More or less, let's call it, you know Tapped Out on senior unsecured notes issuance. So you know there's potential if the stock starts trading. Well we could do a little ATM issuance but nothing really that material for us. So really we'd be looking at uh, new capital in the preferred markets. Especially if if we think it's open now that that analy, like I said, has hit the hit the market there, uh, really it's recycling. Uh, you know, we have some additional leverage, we can apply from the 42 million that we're, we're continuing to apply, uh, over time. If you could be look at our own secure portfolio right now, you know, it's like 50% leverage. Uh, we have additional leverage. We can apply there to keep buying loans, you know, and keep our cash balance about the same, uh, you know, so we have several more securitizations in the pipeline, that should free up Capital, that will be able to

You know, continue purchasing loans and and really uh you know much like we did last uh you know fall you should see or you know we're expecting next quarter to really grow in an interest margin uh again uh to continue to improve dividend coverage from a cash flow basis.

Douglas Harter: Thanks. In the past, you've talked about potentially relevering, I guess calling and reissuing some of the older securitizations, as a way to free up capital. Can you just talk about how the economics look on that today?

Thanks. And in the past you've talked about potentially revering, you know, I guess calling and reissuing, some of the older securitizations, you know as a way to free up Capital can you just talk about you know kind of how the the economics look on on that today?

Brandon Filson: Yeah, that's still something that's in flight, and really what we would be talking there is some of our pre-IPO securitizations. So we have, you know, three securitizations with like a 2019 vintage, one securitization, and a 2020 vintage. From like a true funding cost perspective, the funding costs today look very similar to what they did in 2019. So really, it's just a re-leveraging exercise there, and that's something that we're looking at. So far, the go/no-go decision has trended a little bit on the no-go decision, just based on, if we're spending incremental dollars on that, it's not quite as accretive as new loan purchases, especially as we started to buy some HELOCs, which have a much higher coupon. The current issue securitization market continues to get tighter and stronger in the non-QM space.

Uh you know, from like a fun, true funding cost perspective and a funding cost today look very similar to what they did in 2019. Um so really it's just a revering uh exercise there and you know that's something that we're we're looking at and you know so far the the go no-go decision has trended a little bit on the no-go decision uh just based on the increment you know if we're spending incremental dollars on that it's not quite as accretive as new loan purchases, especially as we started to buy um some helocs which have a much higher coupon. Uh and you know, the current issue securitization Market continues to get tighter and stronger, uh, in the non-qm space,

Douglas Harter: Great. Appreciate the answers. Thank you.

Uh, great appreciate the answers. Thank you.

Operator: The next question is from Randy Binner with B. Riley Securities. Please go ahead.

The next question is from Randy binner with B Riley. Please go ahead.

Randy Binner: Hey, thanks. Good morning. Just in the commentary on book value, did you give an indication of where book value is quarter to date?

Brandon Filson: We believe it's.

Hey thanks. Good morning. So um just in the commentary on Book value. Did you, did you give an indication of of where Book value is quarter to date?

Randy Binner: Apologies if I missed that.

Brandon Filson: Yeah, no worries. I mean, I think there has been a lot of movement in the last couple of days. It is flat to slightly up right now.

Yeah, we believe.

Yeah, no, no worries. I mean, I think, you know, there's been a lot of movement in the last couple days, uh, it's flat to slightly up.

Right now.

Randy Binner: Okay. That's helpful. On, I guess I'm just interested. You said you're buying kind of at a mid-7% coupon, and the average weighted coupon on the book is like 8.5%. Can we just talk about that a little bit more? How do you see where you're able to purchase developing over the next month or the remainder of the year? How, if the Fed cuts rates, that would impact what coupon you're purchasing?

Okay, that's helpful. And then on, um,

Yeah, I guess I just interested so the the I think you said you're you're buying kind of a mid 7% coupon.

The in the, the average weighted coupon in the book is like 8 and a half. So is there is there? Can you just can we just talk about that a little bit more like where and how do you, how do you see where you're able to purchase developing, you know, kind of over the next month or the remainder of the year? How

um, you know, if the FED Cuts rates how that that would impact kind of where kind of what coupon your your your your purchasing,

Brandon Filson: When we say our mortgage rates are 7.5% or, you know, call it mid-7s, that is for our traditional non-QM product. Right now, our portfolio is in the low to mid 8s because we have purchased post the $42 million debt issuance about $75 million worth of home equity line of credits, which is really a newer product for us. We had a couple in the portfolio at the end of Q1. We purchased a couple pools. You know, those are, you know, similar credit profiles, I mean, mid-700 FICOs, combined LTVs even in the 60s, but coupons of, you know, averaging nearly 11%, sometimes a little bit higher than that. So that has driven that increase.

Yeah. So when we say our our mortgage rates are 7 and a half or or you know call it mid 77s. That's where our traditional non-qm product.

Uh, right now our portfolio is in the, the low to mid 88.

Uh, because of we've purchased uh, post the 42 million data issuance about 75 million dollars worth of home equity line of credits. Um, which is really a newer product for us. We had a couple in the portfolio, at the end of q1. Uh, we purchased a couple pools. Uh, you know, those are

You know, similar credit profiles. I mean mid 700, ficos combined ltvs, even in the 60s,

Randy Binner: Got it.

Brandon Filson: would expect where we are, again, where we want to be. Those will be in a separate type of securitization structure when we do that, that will be coming with other Angel Oak entities. We like the product, but now we have kind of slowed down the purchases of that product to get enough of your traditional non-QM loans back on the balance sheet to do a securitization here in the next couple of months.

uh, but coupons of, you know, averaging nearly 11% sometimes a little bit higher than that, so that's driven that increase got it, we

Randy Binner: Okay. Then that was the related question. So it sounds like you're planning hopefully to get one in before the end of the third quarter securitization.

We'd expect where we are again, where, where? We want to be those, those will be in a separate type of securitization structure. When we when we do that that'll be coming with other Angelic entities. So we're we like the product. Uh, but now we've kind of slowed down the purchases of that product to get enough of your traditional non-qm, loans back in the balance sheet to do a, you know, securitization here in the next couple of months.

Brandon Filson: Yeah, that's the plan.

Okay. And that that was the the related question was so it sounds like you're you're planning hopefully to get 1 in before the end of the third quarter.

Randy Binner: Got it. All right. Thank you.

Secularization? Yeah, that's the plan.

Got it. All right. Thank you.

Operator: The next question is from Matthew Erdner with Jones Trading. Please go ahead.

Randy Binner: Hey, good morning, guys. Thanks for taking the question. I am going to follow up a little on that last one. Just kind of on the HELOCs and second liens, where are you guys seeing the most opportunity right now in the acquisition market when you are out there buying loans? Then just kind of following up on the securitization question, should we kind of expect that towards the end of the quarter?

The next question is from Matthew. Erdner with Jones trading. Please go ahead.

Hey, good morning guys. Thanks for taking the question. Uh I'm going to follow up a little on that last 1. Um, you know, just kind of on the heel locks and second lines. Um you know where are you guys seeing the most opportunity right now um you know in the acquisition Market, when you're out there buying loans um and then just kind of following up on the securitization question. Um, you know, should we kind of expect that towards the end of the quarter?

Brandon Filson: Yeah. On the securitization side, I would think that, we are probably looking at targeting sometime in September for the deal. Again, it depends a little bit on where exactly we are with some of our loan pipeline. We have 100-plus million of committed loan purchases, but some of those take a little time to get closed from a locked position to a loan position. If those close a little quicker, we can push it out a little earlier. Otherwise, we have to wait to get to that critical mass, as our securitizations are high $200 million, low $300 million range right now. As far as incremental purchase volume, I think origination volume has been relatively strong. At least rates have been very stable in that market, even if you get a little volatility.

Yeah, so on the securitization side I would think that. Yeah, we're we're probably looking at targeting sometimes September, uh, for the deal. Uh, you know, again, it depends a little bit on where exactly, we are, uh, with some of our loan pipeline, you know, we have

100 plus million of committed loan purchases, but some of those take a little time to get closed from a locked position to a loan position.

uh, if those clothes a little quicker, you know, we can push it out a little earlier, otherwise we have to wait to get to that critical mass right as our securitizations are

Brandon Filson: I think that is probably a little bit of a reflection of the fact that our securitization market continues to be very strong. We are pricing deals now kind of low in the, 140 range of the AAA level, which is kind of pricing on top of agency bonds, very tight spreads. So that market is strong and taking out some of the volatility we have seen over the past, even with rates rising or rates declining. If the Fed starts cutting rates, our portfolio is, I do not expect a huge move in prepayment speeds as we have a lot of current market coupon deals. But if the Fed starts cutting a little bit and rates go from 7.5% to 7.38% or 7.25%, it is probably not going to move that much.

Of volatility. Uh, I think that's probably uh, a little bit of a

A reflection of the fact that our securitization market continues to be very strong.

You know, we, we're pricing, uh, deals. Now, kind of low in the, you know, 140 range of the Triple AAA level, uh, which is kind of pricing on top of agency, bonds.

Uh, very tight spreads. So we're, you know, that market is strong and...

Taking out some of the volatility we've seen over the past, even even in, you know, with rates rising or rates declining. You know, if the bed starts cutting rates, uh,

or portfolio is is

I don't expect a huge move in prepayment speeds as we have a lot of.

Brandon Filson: So much of our portfolio is also still significantly underwater or out of the money from a refinance decision in the 5% coupon range. Obviously, there will be incremental speed pickup, but nothing to increase even, at least is what we are expecting back to historical levels in non-QM of like a 25 to 30 CPR. Today we are seeing new deals in the 20s, low 20s, and some of the older ones still down in the low 10s. Really, the change there on rates declining is going to be a book value change as we see the rates come in, real rates come in, Fed rates cut. You will see our financing costs decrease a little bit on the warehouse side, and then book value start to increase as well, especially again back on those 5% loans that we were originating in 2021, 2022.

Current market coupon deals. But if, you know, the FED starts cutting a little bit and rates go from 7 and a half to 738 or or 7, and a quarter is probably not going to move that much. And then so much of our portfolio is also still, you know, significantly underwater, uh, or, you know, out of the money from a refinance decision at, you know, the 5% coupon range. Uh, you know, obviously, they'll be incremental

Speed pickup. But nothing to, you know, increase even at least is what we're expecting back to historical levels in iqm of like a 25 to 30 CPR got to, you know, today we're we're seeing new deals in the 20s low 20s and and some of the older ones still uh down in the low tens.

Uh, really the the the change there on on rates declining is going to be a book value change.

As we see you.

Randy Binner: That's very helpful. Thank you for the call.

The rates come in real rates, come in fed rates cut. You'll see our financing costs, decrease, a little bit on the warehouse warehouse side, and then Book value. Uh, start to increase as well, especially again, back on those 5% loans that we're originating, and, and 2122.

That's very helpful. Thank you for the call.

Operator: Again, if you have a question, please press star, then one. The next question is from Eric Hagen from BTIG. Please go ahead.

Again, if you have a question, please press star then 1

The next question is from Eric Haugen.

Douglas Harter: Hey, thanks. Good morning. You know, we've seen some more of the mortgage REITs allocate more capital to their origination platforms. I mean, do you guys see that maybe changing the competitive dynamic in the market at all, and just any general perspectives on what that kind of capital allocation kind of means for our market?

Please, um, from btig, please go ahead.

Hey thanks. Good morning. Um, you know we've seen some more of the mortgage rates allocate more Capital to their origination platforms. I mean, do you guys see that maybe changing the competitive dynamic in the Market at all and just any general perspectives on

um, you know what that

Sreeni Prabhu: Yeah, I mean, we are seeing a lot of mortgage companies actually invest in the non-QM side, especially when the other sectors of the mortgage market don't seem to be giving that kind of returns. To be perfectly honest with you, we haven't seen from our mortgage company side, the market is getting bigger, right? The overall size of the market is getting bigger just because there's more education out there. So that's necessarily not a bad thing. I would not say that it's eating into other originations. The overall pot is growing, which is exciting for the overall market. From our origination, we had a team over to our offices, the mortgage company team in our offices yesterday, and our pipelines are growing. So that's healthy for the market. We're not seeing that much creep in credit standards from even other guys. So that's also a good thing, right?

Kind of, you know, that Capital allocation kind of means for our Market.

Yeah. I mean, um, you know, uh, we are seeing a lot of mortgage rates actually invested in the non-QM side, especially when, you know, the other sectors of the mortgage market don't seem to be giving that kind of returns. Um, we want to be honest with you. Um, we haven't seen, from our mortgage company side, I mean, the market is getting bigger, right? The overall size of the market is getting.

Sreeni Prabhu: Because that's a worrisome trend. You've seen that the delinquencies of some of the other originators have gone up. But generally, I would say that even the new guys coming in or guys investing in origination companies, the credit seems to be still on a good path. So yes, we are seeing more people enter, but it hasn't pushed on the fact that it's eating into our origination, or I don't think it's eating into other originations.

Bigger, just because there's more education out there, so that's necessarily not a bad thing. Um, so I would not say that it's, uh, eating into other originations. Um, the, the overall part is growing, which is exciting, uh, for the overall Market, uh, from our origination from, you know, we had, we had a team over to our offices, uh, the mortgage company team in the offices yesterday and, um, our pipelines are growing. So, so that's healthy for the market. We are not seeing that much, uh, creep in in, uh, credit, standards, um, from even other guys. So that's also a good thing, right? Because that's a, that's a worrisome Trend. Uh, you've seen that the delinquencies of some of the other Originators have gone up. But generally, I would say that the, that even the new guys coming in. Are guys, investing in in origination companies? Uh, the credit seems to be still, um, on a good path. So, yes, we are seeing, uh, more people enter, um,

But it hasn't pushed on the fact that, uh, it's eating into our origination or, or I don't think it's both getting into other organizations.

Douglas Harter: Got it. That is really helpful. Historically, you guys have been a fixed-rate lender, but do you guys think we will eventually see more demand for hybrid ARMs to refi these high coupon borrowers if the long end of the yield curve stays high, but the Fed cuts rates? From your perspective, are you guys able to supply that kind of credit? Just your perspective on doing that.

Got it. That's really helpful. Um, you know, historically you guys have been a fixed rate lender. Uh, but do you guys think we'll eventually see more demand for hybrid arms?

You know, to refi these high coupon borrowers. If

the long end of the yield curve stays high, but

The FED Cuts rates. I mean, and from your perspective, are you guys able to supply that kind of credit?

Sreeni Prabhu: You know, it's funny. We haven't seen hybrids in a long, long time, but you've talked about it. To be honest with you, it'll have the curve will have to steepen a lot. I don't know. That's a good question. I think all of us will have to get to that point. I do think those conversations will happen if the long rates stay higher and you start seeing the front end because that environment hasn't happened in a long time. As of today, it's not efficient, and we really haven't discussed it in great detail.

Just your perspective on doing that? Yeah.

You know, it's funny. We haven't seen hybrids in a long, long time. Um, but you've talked about it. To be honest with you, the curve will have to steepen a lot.

but um,

Douglas Harter: Gotcha. Thank you guys very much.

Start seeing the, the front end, um, because that that environment hasn't happened in a long time, but as of today, um, uh, it's not efficient, and we really haven't discussed it in great detail.

Sreeni Prabhu: Thank you.

Gotcha. Thank you guys very much.

Thank you. You're welcome.

Randy Binner: This concludes our question and answer session. I would like to turn the conference back over to Brandon Filson for closing remarks.

I would like to turn the.

Over to Brandon Wilson for closing remarks.

Brandon Filson: Thank you, everyone, for your time and interest in Angel Oak Mortgage REIT. We look forward to connecting with you again next quarter. In the meantime, if you have any questions, please feel free to reach out to us and have a great day.

Thank you, everyone, for your time and interest in Angela mortgage Reed. We look forward to connecting with you again. Next quarter in the meantime, if you have any questions, please feel free to reach out to us and have a great day.

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